Debate over when Fed may hike rates rages at SALT conference

One of the most hotly debated topics among hedge fund managers and their investors at the SkyBridge Alternatives Conference, known as SALT, is when the Federal Reserve will end its easy money policy by increasing interest rates.

“I don’t think it is going to happen until 2016,” said Anthony Scaramucci, founder of investment firm SkyBridge Capital and host of the three-day conference in Las Vegas.

With former Federal Reserve Chairman Ben Bernanke as a prominent guest at the conference, attendees hoped for insight on which way his replacement, Fed Chair Janet Yellen, is leaning.

Yellen has said that the door is open for a rate increase beginning with the Fed’s June meeting, but that the decision will be based on incoming economic data and progress toward the Fed’s twin goals of full employment and stable, 2 percent inflation.

The Fed last raised rates in June 2006.

But the strength of the dollar and a still uncertain economic environment have convinced many conference attendees that nothing will happen before next year.

“I was in the camp that they would go in the first half of this year, but that has been pushed way back, back into the first half of 2016,” said Lee Partridge, chief investment officer of asset management firm Salient Partners.

David McCormick, president of hedge fund Bridgewater Associates, said he does not expect a rate increase until 2016.

Economist Peter Schiff was even blunter in his assessment that there will not be an increase any time soon. “This is the biggest bubble the Fed has ever grown and the Fed won’t raise rates because they can’t,” he said, adding, “They won’t hike in June or in September and we will get another stimulus package.”

Some attendees felt Bernanke, who spoke to a large crowd and then met with smaller groups for dinner and breakfast, pointed in that direction by noting that inflation is still running below its targeted rate.

But comments from Atlanta Fed President Dennis Lockhart that conditions would still be in place for a mid-year increase prompted some attendees to say this year is still a go.

Gregory Fleming, president of Morgan Stanley Wealth Management & Investment Management, and William Daley, a former White House chief of staff who is now managing partner at Argentiere Capital, both said the increase will come before year’s end.